How to make money in the stock market

There is a lot of money in the bag. However, not everyone can get out of it. Some may make a lot of money in the stock market, but others have lost a lot of money. He is very indecisive. Sometimes at that time you lose money, but after a few days you can make a profit and sometimes it is vice versa. So how do you make money off the stock market? In general, there are two ways to make money from the stock market: investing and trading. there the difference between trading and investing is that trading involves buying and selling stocks, futures or options in a short period of time; while investing involves buying stocks, futures or options and holding them for a fairly long period of time, usually a year or more before selling them. What is the difference between a stock, a futures contract and an option? What we do know is that the option is much cheaper than the stock and the futures contract is usually ten times cheaper than the stock price. So if you have enough money to buy 100 units of stock, you can use that amount to buy 1000 units of options. And the return on investment is almost the same between stocks and options. Therefore, you will earn about ten times more if you buy an option instead of a stock or futures contract. However, the downside is that if you lose in this trade, you also lose almost ten times more. When we trade options, the amount of money we can win and lose is almost the same as if we were trading. However, we need a lot of money to buy shares compared to call options. This makes the profit and loss percentage for buying options much higher than for buying stocks. Example is: when you buy $10 per stock unit and $1 per option unit. When the stock price falls by $0.10, the percentage loss for buying the stock is 1%, but for call options, the percentage loss is 10%. This is why the profit and loss ratio for call options is huge compared to buying stocks, even if the stock price fluctuates a little.
Because of the high gains and losses when buying options, trading or investing in options is like a game of chance. It is perfectly normal for the return on investment to be greater than 100%. But it is also perfectly normal for you to lose all your money in investing or trading. To be able to win more than you lose, you need to know some basic options trading strategies and technical analysis. Option is different from action. The option has a time value, while the stock does not have a time value. The value of a share it does not depreciate over time. It is only affected by supply and demand and business performance. However, the value of the option depreciates over time. When the time reaches the option's expiration date, there is no more time value for that option. That is why you need to use a strategy to trade options, minimize losses and maximize profits. The two most basic options trading strategies are the bull spread and the bear spread. The bull call spread is used when the stock price is expected to rise in the coming months; while the bear power spread is used when the stock price is expected to fall in the coming months. The steps involved in this strategy are buying in-the-money options and selling out-of-the-money options. An at-the-money option is an option that has time value and intrinsic value; while the no-money option only has time value. When the stock price moves to the positive side (the out-of-the-money side), the in-the-money option will generate a profit and the out-of-the-money option will result in a loss. However, minus the profit and loss is the net profit generated by this strategy. When the stock price exceeds the out-of-the-money strike price, profit is maximized. A continuous upward movement of the stock price does not generate profit. In this situation, we have to close both positions to withdraw the profit from the market.
If the stock price moves to the downside (the opposite side of what results in a loss), the value of the in-the-money option will depreciate and the out-of-the-money option will generate a profit. However, the profit generated by the out-of-the-money option is limited to the price at which you sold it. The difference between the non-cash gain and the cash loss is a negative value. This is because the profit generated by the out-of-the-money option is less than the loss caused by the out-of-the-money option. The profit from out-of-the-money options is limited in this strategy and the loss from in-the-money options is unlimited. If the stock price moves continuously to the contrary, you risk losing all your capital. So what is the difference between buying a bare option and buying an option with the spread strategy? The difference is that you will lose more money if you buy a bare option and less money if you buy a spread. This is because you do not generate a profit when you only buy a bare option; while the profit is generated by the out-of-the-money option, if the stock price moves to the downside. The disadvantage of the spread is that the commission, which is charged by the brokerage company, is double the naked option. This is because the bare option involves only one position, while the spread involves two positions. Each position will be charged with a separate commission. Also, the purpose of selling out-of-the-money options in the spread strategy is to minimize the loss of the time value of the in-the-money option. In fact, the time value of in-the-money and out-of-the-money options depreciate over time. Since we do not own the out-of-the-money option, we can keep the money we receive from selling this option. When the time value of this out-of-the-money option has depreciated, we use a lower price to buy the option. So we sell high and buy low; therefore, we make money. The money we earn is usually enough to cover the loss of the option's time value in the money. However, you still lose the intrinsic value of the option if the stock price moves in a negative direction. So the bull call spread and bear spread are two of the most basic options trading strategies. However, it is not guaranteed that the stock will bring you 100% profits. However, you must learn how to accurately predict stock price movements using technical, fundamental and current analysis.